Los Angeles — May 18
New research released by the Transamerica Center for Retirement Studies, a nonprofit foundation, underscores how American workers are largely unprepared for retirement and, further, how relatively few have a backup plan in the event they are forced into retirement earlier than planned.
The results of the 12th annual Transamerica Retirement Survey — conducted among 4,080 American workers — found that for many Americans, the foundation of their retirement strategy is simply to not retire or to work considerably longer than the traditional retirement age of 65.
According to the research, 40 percent of respondents now expect to work longer and retire at an older age since the recession began. Altogether, 39 percent of American workers plan to retire after age 70 or not at all, and more than half (54 percent) of workers plan to work in retirement. Of those who plan on working after retirement or age 65, the most commonly cited reasons are out of necessity (44 percent).
While many workers may plan to work past the traditional retirement age or never retire, unforeseen circumstances could force them to stop working before they planned. The survey found the majority of workers are unprepared for this scenario — 70 percent agree they could work until age 65 and still not have enough money saved to meet their retirement needs. This sentiment spans across age and income:
• 69 percent of those in their 20s and 72 percent of those in their 30s agree they could work until age 65 and still not have enough money saved.
• 80 percent of those with a household income (HHI) of less than $50,000 agree.
• 74 percent of those with an HHI $50,000 to $100,000 agree.
• And, 59 percent of those with an HHI over $100,000 agree.
About a third of workers (31 percent) anticipate not just needing to provide for themselves in retirement, but for additional family members as well.
“With all of life’s uncertainties, planning not to retire is simply not a viable retirement strategy,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies. “Planning to work past age 65 is an important opportunity to continue earning income, save more, and help to alleviate a retirement savings shortfall; however, it’s important that workers be proactive in setting a retirement savings goal, saving and investing for retirement, and having a backup plan if they are forced to retire sooner than expected.”
The survey also found that 82 percent do not have, or are unsure if they have, a backup plan in place in the event they cannot work as long as they need to, and that rate is even higher among those who plan to work past age 70 or never retire (87 percent).
“It is so vital that everyone have a firm grasp of their retirement saving and planning options, and have a contingency plan if they have to retire sooner than planned or are faced with a health issue that could quickly erode their savings,” Collinson said.
A large number (44 percent) of American workers do not have a strategy to reach their retirement goals. Of those who do have a strategy, only half have factored in health care costs and one-fifth have factored in long-term care insurance. Additionally, just 57 percent of workers have factored in Social Security and Medicare benefits.
Overall, relatively few workers have a good grasp of how government benefits will impact their retirement: 40 percent know quite a bit or a great deal about Social Security, 28 percent know quite a bit or a great deal about Medicare and 23 percent know quite a bit or a great deal about Medicaid.
Source: Transamerica Center for Retirement Studies